Brazil tax reform preparation for indirect tax pros

Are you ready for Brazil’s tax reform?

Amidst global political shifts and economic uncertainties, the Brazilian government embarked last January on a significant undertaking to overhaul its indirect tax regime. For tax professionals, this presents a unique opportunity to lead their organisations through a transformative process.

With the recent sanctioning of Complementary Law No. 214/2025, Brazil is poised to thoroughly transform its fiscal environment. Simply put, the objective is to streamline the tax system through due legislative channels.

For those tax professionals operating in Brazil, this is more than merely adapting to new regulations. You can refine corporate tax strategies, thereby positioning organisations for enhanced resilience and agility in the years ahead

 

Understanding the terrain

On January 16, 2025, the President of Brazil sanctioned Complementary Law No. 214/2025 (Lei Complementar No. 214/2025), following the approval of PLP 68/2024.

Brazil’s old tax regime was a patchwork of overlapping taxes: PIS, COFINS, ICMS, ISS, and IPI. Each with its own quirks and compliance traps. The reform wipes the slate clean, replacing them with:

• IBS (Imposto sobre Bens e Servicos): The new subnational VAT, managed by states and municipalities
• CBS (Contribuicao sobre Bens e Servicos): The federal VAP administered by Brazilia
• IS (Imposto Seletivo): The selective excise tax, targeting products detrimental to health or the environment

Key legislative changes

• Dual VAT system: Goodbye to the old maze, hello to IBS and CBS.
• Destination-based taxation: Taxes now follow the customer, not the supplier.
• Levelling the playing field across Brazil’s vast territory.
• Minimum effective tax rate: Multinational profits face a 15% floor.
• Transition timeline: The reform rolls out from 2026, with full implementation by 2033. The transition is a marathon, not a sprint. Expect overlapping rules and phased retirements of old taxes.

Mission intel

• Non-compliance is not an option. The new regime is mandatory, and the authorities are watching.
• Your indirect tax function will be tested. Systems, contracts, processes, and people must adapt simultaneously.
• The transition period (2026-2032) is the most hazardous phase. Prepare for duplicative reporting, staff retraining, and evolving rules. The ‘regional fog’ will be thickest in these years.

Survival tips to thrive in the new regime

Tip 1: Lay the groundwork for success

• Ensure your data is accurate, accessible and ready for the new regime.
• Upgrade your ERP and tax engine to handle IBS, CBS, IS, and destination-based rules.
• Automate wherever possible. Manual processes are sink holes. One misstep can mean costly penalties, lost credits, or reputational damage.
• Continuous updates are your rations. The rules will evolve. Ensure your systems and processes can adapt quickly.

Tip 2: Assemble your tools and talent

• Invest in automation: The transition will bring a surge in reporting and compliance tasks. Automation is your shield against overload (Expected to impact up to 74% of indirect tax departments).
• Scenario-simulation drills: Use them to test pricing strategies and manage risk under the new regime.
• Upskill and reskill: The learning curve is steep. Upskill your current crew and bring in new talent as needed (62% of companies expect a talent crunch).
• Keep communication lines open: Engage local experts and advisors to interpret the latest legislative updates and benchmark your readiness.

Tip 3: Build resilience and controls

• Strengthen your fiscal structure: Update policies, controls, and documentation to withstand regulatory storms.
• Reduce risk: Proactively manage tax burdens, ancillary obligations, and compliance exposures.
• Prepare for audits: Maintain a bulletproof audit trail. The inspector will come knocking.
• Monitor tax incentives: The reform eliminates some (like ICMS), but new opportunities may arise for those who forage.
• Beware of penalties: Non-compliance is costly.

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Navigating the legislative landmarks

Key laws and terms to know

• Lei Complementar No. 214/2025: The backbone of the new regime, establishing rules for IBS, CBS, and IS.
• PLP 68/2024: The bill that paved the way.
• IS (Imposto Selectivo): The new excise tax. Watch for its impact on your product lines.
• IBS Management Committee: The new command centre for subnational VAT administration.
• Transition milestones: 2026 (reform begins), 2029-2033 (gradual ICMS/ISS phase out), 2033 (full implementation).

Waypoints to avoid common pitfalls

• Don’t delay system upgrades. The earlier you act, the smoother your journey.
• Study the terrain. Your team must be well equipped to handle unknown risks.
• Review contracts. Old clauses may trigger unexpected liabilities under new rules.
• Don’t go it alone. Local expertise is your best guide in unfamiliar territory.
• Allocate sufficient resources. Under-budgeting can leave you stranded mid-journey.

The command centre

The indirect tax function has a rare opportunity to step up as a strategic partner, guiding your organisation through transformation and growth.

But even a seasoned scout needs a plan. That’s why we’ve created a comprehensive Brazil Preparation Checklist for every phase of the journey. It covers everything from mapping legislative changes, and building your transition team, to upgrading technology and tracking KPIs.

Secure your survival kit

Brazil’s tax reform is a once-in-a-generation challenge, but also a launchpad for transformation. Will you lead your organisation to success, or be caught up in the complexity and non-compliance? 

Download the full Brazil tax reform preparation checklist now to access tactical steps, best practices, and expert insights you need to not just survive, but thrive.